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Good Debt, Bad Debt: Stay Out of the Red


With the average American in nearly $9,000 worth of credit card debt, and paying interest rates that are higher than ever before, it is no surprise that many people are constantly searching for ways to get rid of tdebt.

Not all debt is bad debt.  When looking to purchase a home or send your child or yourself to school, debt is a frequent occurrence. Borrowing money on plans of future money may send you into a struggle to pay off the debt later.

 Bad debt constitutes debt that has gotten out of control. Many assume that their little plastic card is the best way to buy things when the money is running low. Using credit cards for purchasing things like computers and cars, rather than the electricity and water, can lead to major problems in the future. Do not put anything on your credit card that you know you cannot pay off within a couple of months.

If you have already gotten yourself into debt , there are definitely some things you can do to protect yourself:

  •  Spending control is most important.
  •  Budget your monthly allowances and then save what is left over rather than spending it frivolously.
  • Pay more than your minimum on outstanding balances.
  • Pay off your credit bills that are collecting the highest amount of interest first. Going down the list from highest interest rates to lowest interest rates will save you money in the future.

Debt is a common problem, so do not feel foolish asking for help. There are many professionals who provide good, sound advice when it comes to dealing with debt and credit issues.

  • Have up to three months of living expenses saved.
  •  Do not borrow against a 401(k) as this could jeopardize your future.
  • Most mortgage interest rates are reasonably low and can be paid off with reasonable monthly payments. Refinance your mortgage if the rates decline significantly to save thousands over the term of the mortage.
  • Make an extra mortgage payment per year to the principal to save thousands over the term of your mortgage.

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